Brad, in current America you need to have written polices with regards to acceptable work practices
You have to document the infraction and give warning (or termination depending on your companies policies)
As much as it sucks to say it - have your legal team and Human Resources draft an acceptable polices and work standards document if you don't already have one.
Have 2 copies given to all employees, one they must give back signed stating they have read and understand the document
Beyond that what would I do, give the employee a written warning with the understanding that surfing ESPN.com on company time is unacceptable (if that is in keeping with workplace standards) and may be grounds for termination
Really depends on the situation, employee and work place atmosphere
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