Kinda' makes me cringe.
One thing to consider when implementing such a monitoring tool would be to include it in the code of conduct or acceptable use policy for internet / computers in your organization. Then get the employees to sign it and retain a copy on an annual basis (e.g. an acknowledgment that their activities may be monitored, who has the authority to do so etc.).
You should probably get legal involved before implementing such a program (they can help with the language for the policy).