Is that fellow working next to you a policeman?

None of the employees at the computer firm in North Reading, Mass., had any idea that "Steve," the new custodian, was actually an undercover police officer. He socialized with other workers, asked around to find out where he could buy illegal drugs, even smoked some marijuana.

On the basis of evidence gathered by Steve and another local policeman posing as maintenance workers, 13 employees of compugraphic Inc. were arrested on drug charges last March.

In aother Boston suburb -- Melrose, Mass. -- two undercover narcotics agents worked for two weeks at Armatron Inc. last May. The evidence they gathered resulted in the arrest of eight employees on drug charges.

What set these two undercover operations apart is that Compugraphic and Armatron not only paid for the officers' overtime, but put up the "front" money to buy from drug-dealing employees.

Until recently, companies were most likely either to ignore or quietly fire employees known to be involved with drugs at work. Compugraphic and Armatron (formerly Automatic Radio) are among companies pioneering the controversial practice of partially footing the bill for police investigations of employee drug use.

Middlesex County Assistant District Attorney Odin Anderson, who coordinated the North Reading investigation, says many corporation officials across the United States are calling to find out how to "hire" a police investigation.

For the most part in the past, Mr. Anderson says, "the workplace has been off-limits to law enforcement. We know what's going on in there [the growing problem of employee drug use on the job], but you can't get in there unless you're asked. Now the factories and the assembly plants are no longer sacrosanct. We want it to be known that this oasis of protection is no longer protected."

Civil liberties supporters are not so pleased.

"The Constitution guarantees equal justice under the law. These cases raise the specter of people who can afford justice buying it, while those who can't afford it not getting it," says Harvey Silverglate, a director of the American Civil Liberties Union of Massachusetts. "This era of government cutbacks means we may have to live with fewer police officers.If the pinch is felt, it should be felt equally."

Mr. silverglate said that the fact that the corporations helped pay for the investigations "reeks of special interests being able to buy a public resource. It's important to keep the police working for the public and not for private interests."

Assistant district attorney Anderson dismissed suggestions that the kind of investigation carried out at Compugraphic is somehow wrong. He argues: "Small towns have no money for undercover investigations. This is a novel experiment in law enforcement, and it is a way for us to reach [a kind of] crime out there that no one's been able to get to until now."

Despite the controversy over it, the method of undercover police work use at Compugraphic and Armatron got results: most of the 21 people arrested at Armatron and Compugraphic pleaded guilty to the charges. However, Anderson readily admits that the employees arrested were all "small fry." No major drug suppliers were caught.

"We by no means busted a major drug ring," he says. "We went in looking for the big tuna, but all we caught were the flounder and the cod."

Part of punishment for those convicted included restitution to the company to help pay off the $5,000 the firm invested in the drug probe.

In the past, companies have been accustomed to hiring private detectives to identify drug users and dealers on their premises. Brian LeMauk, reginal sales manager in Boston for Burns International Security Services Inc. says that company drug probes make up about half his firm's investigations. Blue-collar and white-collar employees are about equally subjects of such probes.

The fact that companies want to keep internal drug dealing quiet is a virtual license to sell illegal substances, says Anderson, because although workers could lose their jobs, companies have been reluctant to press legal charges.

Anderson said the investigation at Compugraphic worked very well because the firm is small and very tightly run.

"But Compugraphic didn't know what the reaction would be in the business community and in the town," he explained.

The reaction has been favorable so far, and Anderson says he believes the experience will encourage other firms to pay for undercover probes on their premises.