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They would be allowed to check their staff's emails and internet communications without their consent.
Deputy Prime Minister Julia Gillard has told Channel Nine the proposed changes would step up national security of Australia's computer networks.
"We want to make sure that they are safe from terrorist attack," she said.
Cyber snooping plan under attack
Civil libertarians say employers could become quasi spies under proposed laws giving companies the right to monitor workers' emails in a bid to protect Australia from cyber terrorism.
The federal opposition has also questioned the need for the law changes, saying employers should not be burdened with the job of watching over Australia's national security.
Civil liberties groups are outraged over the proposed law changes, which the government hopes to have in place by the middle of next year, saying there is a heavy onus on the attorney-general to make out his argument that the powers are needed.
"Individual employers under this proposal become effectively an arm of the intelligence services and the police, and the consequences of that are just enormous," Australian Council for Civil Liberties president Terry O'Gorman said.
"It's extremely Orwellian," he said.