I am a consultant and a lot of my clients use a time tracking software that takes screenshots. I have no problem with it considering I'm a consultant, I charge hourly, and a high rate. On the other hand, I have a full time employee who works for me. I check in with her regularly throughout the day, and since she's in training and we are consciously trying to monitor her workload to get her to having half her time as billable hours, we do check in on how she spent her day, and due to her learning disability, I help her block her time each day so she can complete tasks successfully and prioritize appropriately. This feels a little micromanagerish to me, and I dislike it, but she is in training, and we tried working a different way that was more hands off and found that for now, while she's learning so many new tasks, she needs the support to check in and ask questions and show me how she's doing.

My point being that there are times when closer oversight of an employee is called for and appropriate, and times when it's controlling, hostile, and oppressive. And as Sarahsweets linked to OSHA, possibly even breaking the law. I would not stay under any employer who required me to clock out to use the restroom. I think you should investigate further to see if this is actually legal where you live and under your employment structure.