Yes it is legal - in very limited circumstances. There must be a strong suspicion of serious criminal activity, the monitoring must only continue for a reasonable length of time and must stop as soon as the evidence is gathered.
Any information gathered that is not related to the criminal activity must be disregarded unless it is of such nature that it would be unreasonable to expect the employer to disregard it.
Your Human Rights do not come in to it - that gives people the right to privacy in the home, not the workplace.
Any evidence gathered re the criminal activity can be used in court.
http://www.out-law.com/page-445
http://www.personneltoday.com/Articles/2005/09 /20/19315/qa-employment-practices-data-protect ion-code.html
If you google 'covert monitoring in the workplace' you will find plenty of information. Make sure it is relevant to the UK though.