Fairly or not, when someone has a job, they are a representation of their employer. The more public their job or persona are, the more true that becomes. Employers can gain or lose revenue as a direct result of the public opinion of the personal lives of their employees.
Further, personal-life choices can also affect workplace atmosphere. If one employee (for example) posts on social media things that make other employees uncomfortable, angry, or even afraid, it can definitely affect work-product, efficiency, employee harmony, etc.
So if an employer perceives an employee's off-hours behavior to be impacting their bottom line, they're well within their rights to use non-work activity as a reason for making work-related decisions.