The scandal about employers asking for employee and interviewee Facebook passwords is growing fast. We talked about a few examples of this disturbing trend here before, including a discussion of the potential legal issues that could result.

While the debate started off about interviewers asking job applicants to give their Facebook password, it soon progressed to even asking someone to enter the password then and there. Now, some are discussing the practice of requiring employees to “friend” the company or other employees on Facebook.

Then, Facebook itself weighed in on the whole affair, as Josh Wolford reported here.

The most alarming of these practices is the reported incidences of employers asking prospective or actual employees to reveal their passwords. If you are a Facebook user, you should never have to share your password, let anyone access your account, or do anything that might jeopardize the security of your account or violate the privacy of your friends. We have worked really hard at Facebook to give you the tools to control who sees your information.

Facebook takes your privacy seriously. We’ll take action to protect the privacy and security of our users, whether by engaging policymakers or, where appropriate, by initiating legal action, including by shutting down applications that abuse their privileges.

And, one Senator has even come forward to say that the practice should be made illegal altogether.

There is another concern that should also be noted. What if an interviewee is drawing unemployment benefits? What if, in the course of an interview, they are asked to give or to enter their passwords to Facebook or other sites so their private materials could be viewed by the interviewer? What if they refuse? Could this result in loss of their benefits?

We spoke with Terri Bradshaw, spokesperson for the Office of Employment Training in Frankfort, Kentucky. She told us a couple of different things that should be considered. The first of which is that an interviewee would not lose their benefits.

“They would not. Rather, it would be treated just like any other job interview where you ended up not being offered the job for any reason.”

But, the landscape changes a bit when we talk about an existing employer/employee relationship. What if an employer demands access to personal information by asking for passwords to Facebook, to personal email, or even to requiring that an employee add the company or a representative thereof as a friend so their profile could be viewed? If the employee refuses, could they rightly be fired? And, if they are, could they draw unemployment benefits?

“At this point, access to social networking has not really been addresses as a reasonable request for an employer to make.”

If there is a termination, the terminated employee could file for unemployment and begin an approval process. In a state like Kentucky, where employment is “at-will”, anyone can be fired or quit without giving cause or notice. However, if their eligibility for unemployment benefits is challenged by their former employer, an investigation and appeal process begins.

“There are three stages that these appeals will go through, if either party continues to contest the decision, the last being the Unemployment Insurance Commission. If, after that, there is still a challenge to be brought about eligibility, the whole thing goes to court.”

As you can imagine, this could end up being a huge hassle, not only in terms of inconvenience and cost, but in terms of public perception for an employer. Who wants to be known in the local press as the company that invaded the privacy of its employees, and fired someone who stood up over that, then denying them unemployment and fighting it to court?

In the end, this practice of peering into the private lives of employees when they have clearly put up barriers to prevent it may be a very costly notion for businesses. The ACLU has already weighed in on it. And, the more attention it gets in the media, they may well line up to help disaffected employees who want to pursue legal remedies.

In a world where Facebook wants people to “share” everything, some people still want to keep their lives to themselves.