Reporting on Your Employees' Internet Access?

kooky45 asks: "My team has recently installed content filters for my company which restrict the web sites that employees can visit. It also logs the sites they do visit; not whole URLs, just the site domain names. This has been useful for a couple of disciplinary investigations of employees suspected of wrongdoing. However, word has got round to some managers that this capability exists. They are starting to ask my team to provide lists of sites that their team members have accessed over the past few weeks, claiming they are suspicious of time wasting on the Internet and need proof. We're pushing back because of privacy concerns but the pressure is building on us. We have no experience in this area, and I'd like to ask Slashdot how other companies handle this, what the important considerations are, and where it could all go wrong?"