Yes, I actually implemented such a thing at a company I worked at after Google. We'd give the candidate a fairly simple and self contained codebase, and ask them to add a simple, incremental feature in the span of an hour. No limits on legitimate internet access, stack overflow, etc, and using their favorite text editor (we had several already set up). This worked great for us, as it selects for people who can solve practical problems in code they're not familiar with, which is bulk of the work of any software engineer.