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Must you give a job interviewer your Facebook password?

FORTUNE — Dear Annie: What’s all this I hear lately about job interviewers requiring applicants to hand over their Facebook passwords? I’ve been job hunting for about three months. (I’m working now, but not thrilled with my current employer.) So far, no prospective employer I’ve met has requested this information, but someone told me more companies are doing so these days, so I want to be prepared.

I really don’t feel comfortable letting strangers nose around in my private Facebook postings — and why would they need to see baby pictures of my kids and snapshots of my last vacation, anyway? So if an employer does ask, how can I say “No way!” without blowing my chances of being hired? — MYOB in Michigan

Dear MYOB: The reason you haven’t come across any job interviewers asking for your Facebook password is that the practice is pretty rare, for some complicated legal reasons (more about that in a minute). Nonetheless, it has happened here and there, and the blogosphere has been buzzing with indignant rants about the practice.

The brouhaha started when word got out that the Maryland Department of Corrections was asking applicants, and even some current employees, for their Facebook passwords. Officials at the agency said the request was aimed at making sure that prospective prison guards didn’t have any gang affiliations. After trolling through 2,689 applicants’ Facebook pages, the agency declined to hire seven applicants based on what their Facebook pages revealed.

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The American Civil Liberties Union complained that this was a violation of applicants’ privacy, and Maryland state legislators introduced a bill that would prohibit employers from requiring job candidates to provide their Facebook passwords. Not to be outdone, lawmakers in Illinois and California came up with similar proposals. None of the bills have been signed into law just yet.

Last week, Facebook issued a statement saying it will sue employers who ask for people’s passwords, because giving out the information violates Facebook’s policies. “If you are a Facebook user, you should never have to share your password,” wrote chief privacy officer Erin Egan. The controversy has stirred up a hornet’s nest of other online commentary, like a post by Tecca blogger Mike Wehner that featured a photo of the infamous Maryland job application.

Wrote Wehner, “For anyone — especially a company or potential employer — to casually request access to [private Facebook pages] is as bold as asking for a copy of a person’s house keys. Would you agree to a full search of your home and worldly possessions in order to land a job? If the answer is no, you should be just as hesitant to let someone rummage around in your online identity.”

Granted, but it’s worth noting that, from an employer’s point of view, the issue is more complex than it might seem at first glance. On the one hand, corporate legal departments usually advise hiring managers against delving too deeply into people’s online personae, because doing so might disclose information that employers are not allowed by law to ferret out in a job interview.

“What if you find out an applicant is expecting a baby, or has radical political leanings, or is over 50, or has a chronic medical condition, or some other personal information you can’t legally ask for, and then you decide not to hire that person for some other, completely unrelated reason?” asks Michael Schmidt, a partner in the employment law practice at Cozen O’Connor in New York. “How would you prove in court why you didn’t hire him or her?”

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On the other hand, Schmidt, who specializes in the nascent field of legal dilemmas created by social media (and writes a blog on the subject), points out that employers also have a legal obligation to gather as much due-diligence information about job candidates as possible.

“If an employer doesn’t look at every available source of data, and then hires you, and you do something harmful, the company is liable for your behavior because it made a ‘negligent hire,’” says Schmidt. “The unresolved question is, does your Facebook page come under the heading of due diligence?” He adds: “The law always takes a while to catch up with new technology.”

Apparently so. But what should you do in the meantime if you’re asked for your password? Says Duncan Ferguson, a managing director at Chicago-based human resources and outplacement consultants BPI Group, “The best approach is to direct the interviewer to LinkedIn instead. Say something like, ‘I only use Facebook for sharing personal information with family and friends. My LinkedIn profile is my professional presence online.’

“LinkedIn has become so integral to the recruiting process that no one should have a problem with that,” Ferguson adds. If they do, you might question whether you really want to work there anyway. “This really comes down to an issue of trust,” he says. “Are they going to trust you to do your job well, treat customers with respect, and so on? Everything that happens in an interview gives you a window into the company’s culture, and asking for your Facebook password suggests they don’t trust you now — which means they won’t later, either.”

Bill Peppler, managing partner of Kavaliro, a staffing company based in Orlando with offices in 30 states, reminds job seekers to be aware that, even without a password, “employers will look at Facebook, so do use the site’s privacy settings to keep your party photos visible only to your friends.”

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Peppler says he and his team look at thousands of Facebook pages every month, both for clients and for the firm’s own hires. “It’s hard to keep up with all the changes in Facebook’s privacy settings,” he acknowledges. “But it’s worth the effort to make sure employers can see only what casts you in the best possible light.”

In one recent, increasingly common case, a candidate “got all the way to the final offer stage and then was turned down for the job because of some pictures on Facebook that made our client question his judgment,” Peppler adds. “And this was a professional with 20 years of experience, not a college kid. We had to give the applicant the bad news. So we used it as a coaching moment.” Enough said.

Talkback: Has a job interviewer ever asked for your Facebook password? If one did, what would you say? Leave a comment below.