Is this an invasion of privacy?

Ok, i work at a call center for a bank. As such we have a monitoring agent installed on our avaya phones which records conversations. Recently our manager informed us that the QA department could hear the conversations we were having, even when we were in Mute, and not on a call. She also stated that she would take action against these individuals if these conversations continued. Is it legal for my employer to monitor me when not on a call, and to take action against me for a private conversation?