Re: The mistake was to use them for blackmailing intead of simply blocking the domains
Reading the access logs is no different from walking over to see what your employee is working on.
Logically and rationally, yes. But the way that the law has been written in some jurisdictions affords employees a right to privacy that then (I presume unintentionally) cloaks activities that they could be sacked for.
Nothing new here - most laws are very poorly drafted, leading to geometric increases in the volume and complexity of statute law, declining levels of understanding of the law, and plenty of unintended consequences. Couple that with cloth eared and slow to react governments, and the unintended consequences snowball - like in the case of tax tourism by large corporations.