Of course life isn't fair. But here the result is that companies will ignore potentially great candidates which dedicate all their programming time to their job and instead consider candidates which may be not just worse programmers, but also are more interested in their hobbies (or padding their CV) that doing their job.

I'm saying this as somebody who most of the time has some side project going on.

The point of most recruitment pipelines isn't to avoid missing a great candidate but to avoid hiring a bad candidate. There's many great candidates so missing some or many is fine. Hiring a bad candidate however is very expensive to deal with. Many smaller companies view workaholism and a potential to work 996 as a very valuable thing to hire for.