I was asked this question by a reporter at the AP. You can see the story here.

It's technically illegal for employers to ask -- as it's against Facebook's terms of service to share your passwords or login with someone else's information. But it's unlikely that an employer would be prosecuted since you are giving them permission to login to your account.

That said, in a job search -- if you want to get hired, I think it's important to look like you've nothing to hide. In general, you want to be friendly, approachable, and presentable.

Here's a two step process you can use to address the question:

  1. Ask what the employer's looking for when they look at Facebook. Don't ask "Why" as that may come across as aggressive. Instead say, "What will you be looking for?"
     
    In many cases, employers who have asked for Facebook login information have been law enforcement professionals -- looking for evidence of gang involvement or illegal opportunities.

    In others industries, employers may want to see your Facebook profile so that they can see how your out-of-work activities demonstrate what you want to do for work. Want to be an event manager? Do you help organize activities for your friends? In this case, your involvement can actually help you and work in your favor.

  2.  Politely sidestep the password access information issue by offering an alternative way for the employer to get the information.

    You could say for example, I'm very careful with my passwords -- and assume you'd want me to be careful with my company e-mail account if I come to work for you. How about I friend you -- or one of your colleagues instead -- and you can take a look around.

    (This then gives you the added bonus of time, you can go back in and clean up information if you need to.)

    Want more insight on what employers are looking for? Check out the advice I gave reporter Jennifer Doll when she gave me (temporary) permission to snoop around in her Facebook and Twitter accounts. This piece gives a full overview of my advice on what to include -- and what not to include online.