Psionicist said:
I sure as hell wouldn't work at your friends store if he treated me like a criminal. Is it even legal to spy on your own employees?
Not just legal, it's pretty much expected. (In the US at least). If you refuse to work with an employer who considers you a possible thief, you're pretty much not going to be working retail in the USA.
Just about every retail establishment I know of has cameras in the store, sometimes they are labelled, sometimes not, sometimes some are and some aren't. Many places often have more cameras on the employees and registers than they do the customers, and smart employees know to expect that at any given time to act as if there is a camera on them and their boss is watching from somewhere.
As was said, as long as it's not in a place where you would have an expectation of privacy (restroom or changing area generally) you can monitor things however you want pretty much. If it would be legal to have an employee there standing watch, you can have a camera there standing watch. Some places have small disclaimer signs at the entrance to the effect of "To improve your shopping experience here at <storename> we have installed security cameras for your safety", and thus they have also officially warned you are under surveilance.
That's not to say that everything gets noticed, sometimes the cameras are just not in the right place. One time when I was working at a department store, somebody stole about $2000 in leather jackets by just cutting the cables binding them to their rack, picking them up and making for the door, and the cameras were somewhere else at the time. So if you have fixed cameras, you need to figure out what the most important thing is (also, don't put your most valuable merchandise right by an exit!)
There are even TV shows here that play mostly security camera footage of failed robberies, employees getting caught, and other "interesting" things (as well as police cruiser camera footage of chases and traffic stops).