Can a company start docking time if the employees have short personal conversation at work?

The owner of the company I work for is starting to dock 15 minutes for every 5 minutes that you are heard talking to your co-worker. This co-worker and I work side by side and rarely take breaks, so we converse in-between the jobs we are required to do. The owner says that there are too many errors in packing the orders and she does not want ANY talking at all. The office manager is now required to listen to us all the time and report ANY talking. She is also tampering with our time cards and changing them after we turn them in. We all feel that this is improper and maybe illegal. Any suggestions?