The problem with
monitoring employees activity in the legal sense can be combated by informing them before any installation that they may be monitored at anytime without their knowledge. After all, phone calls are done this way, so I don't see a good reason it wouldn't work on a PC. Any questions on specifics might be best left to a lawyer.
Additionally, it should be on company PCs only.
I think you don't have to ask an employee to monitor them. This is no different than my boss physically walking up to me and looking over my shoulder. He doesn't have to ask, and I would be surprised if he didn't check on my from time to time. You're being paid to work, not screw around. Now, this must be limited to work and company-own technology.