A reasonable manager would accept the occasional smoke break, but do something about hour long naps.
Often a manager will not have any say over these things. "The metrics speak for themselves!"
Regardless, I don't think we should design systems with the assumption that the people in charge of them will be compassionate and reasonable. There are a lot of petty, corrupt (in the moral sense, not financial) people out there in positions of power over others.
It would always be entirely unworkable at anything resembling the current fine structure, with fines in the $100s for a single infraction. These are based on the assumption that people are rarely caught.
I could see a surveillance-based system working, something on the lines of a congestion toll. Maybe $0.02/mi/mph over the limit, so going 10mph over the limit for 20 miles would be a $4.00 charge. We'd also have to eliminate the bogus insurance surcharges which falsely equate speeding with unsafe driving (barring neighborhoods & construction zones, they can signify either an unsafe driver or a highly skilled driver).
Even without intending to, everyone would go from a ticket or two per decade to dozens of tickets on every commute.
"But the law is still the same!?!"
Of course it is, but changing from poorly scalable human-required surveillance to always-on, fully-scaled electronic surveillance, changes it from completely reasonable to massively oppressive.
If everyone's productivity is fine, and people take unauthorized breaks, no one will notice, all is cool. If one or two people are noticeably unproductive, the manager will likely investigate and fix the unauthorized breaks, which is also fine.
But with constant electronic surveillance, it's no longer about meaningful productivity differences, it is about oppression.