It has to be somewhere in their privacy policy, or they could be sued if that is true.
Apple employee's aren't allowed to talk about that kind of material, though...
I can't see why the Apple employees would be different to anyone else.
Some people are nosey. I would not recommend ever giving anyone else the password needed to access any personal data on your hard drive. If you absolutely must give it in for service, you could always put your personal files in a password-protected zip file before handing it in.