Ah, but what you are failing to remember is there are many jobs in which employers care about the stability and safety of an employee, and not just "are they doing illegal things." For example, I have a friend who, if he is caught drunk driving, or if he gets more than X hundred dollars in traffic fines in one year, he loses his job immediately. The reasoning behind it is - if he is that unstable and untrustworthy in his personal life, we cannot trust that he will handle the job that he was hired to do due to the extreme danger it would present to the people who put their lives in his hands every day. (No, he's not a pilot...but...similar idea.)
So, while I do agree employers should stay out of employees personal lives to a large degree, there is some aspect of managing risk which they (rightly) want to do.