The <a href="http://apps.leg.wa.gov/billinfo/summary.aspx?bill=1528&year=2009">Worker's Privacy Act</a> faces the Washington State legislature. It attempts to limit the ability of employers to require employees to be lectured to or trained in non-business matters (such as political views). It does not address an expectation of privacy that an employee may have.
Do "younger" workers actually expect that an employer would not have access to information that is publicly available? I realize that there have been news reports of persons who, for example, indiscreetly update their Facebook status ("I'm soooooo bored at work..."). I'd lump these news items with the dumb crook stories ("stole a security camera but not before it had taken his picture"). I wouldn't generalize from these anomalous instances.
But one should always answer the question that was asked: Do you have the right to expect privacy on the Internet? Yes, as a "right", you can have any expectation you choose. Be aware that your expectation will not be met.
I've only been involved in the hiring process, from the "Hirer" side, a few times, and then usually as the person who asks some technical experience questions, then interprets the answers for the HR person. We have used information, that is PUBLICLLY posted on sites such a face book and MySpace as PART of the package for the decision making of who gets hired. People who post pictures of themselves involved in questionable activities kind of create a double whammy for themselves, first they created a situation where they were perhaps drunk, naked, and painted bright blue while standing on the roof of a moving car, if that is what you do for fun, there might be some issues that could migrate to your job. If you <b><i>CHOOSE TO PUBLICCLY POST </i></b>evidence of such behavior, then there are bigger problems related to intelligence and responsibility that might eliminate your resume from the "possible" pile. I think that some people believe they are entitled to a job, this is not so, you at best are entitled to an opportunity to prove you can do the job. Unless you are some kind of socialite/actor/RAP star, proudly sharing your naked, drunk, blue posterior with the world will probably only cause you grief on the job search. Is it fair? "Fairness" is irrelevant in these kinds of cases; I see the images posted on such sites as potential "Idiot Filters" for employers. HR departments are responsible for finding good employees; those that strive to earn a <a href="http://www.darwinawards.com/">Darwin Award</a> should be removed from the candidate pool.
Just my 0010 cents.