Isn't that kind of an invasion of privacy... and possibly illegal?
It's one thing when the office is monitored... that is the company's space and they should be allowed to monitor it as they see fit. However, monitoring someone at home just because they do work for you is a total invasion of privacy.
Now that I think about it, yes, it is illegal, unless the employee knows they are being monitored and has agreed to allow it in their home. They also have to be aware that they are being monitored at work for it to be legal, for that matter.
So, this begs the question... is the employer planning on informing the employee that she is being monitored in her own home? If not, make sure that the employer knows they would be looking at a nice, fat lawsuit.