Putting aside the discussions of ethics, let's look beneath the surface at what the question is really about and also ask ourselves if this question meets the broad guidelines of a good subjective question.
The answers to this question so far are opinion based, but many contain detailed explanations to help support those viewpoints. What's more, the question meets the following six subjective guidelines from the Good Subjective, Bad Subjective blog post:
1. Great subjective questions inspire answers that explain “why” and “how”.
Most of the answers provide explanations for why interviewers may be administering such practices. At least one of the answers I read offers some input on how to tell if you're being taken advantage of -- how to tell the difference between an employer's evaluation and an employer taking advantage of free labor.
2. Great subjective questions tend to have long, not short, answers.
Most of the answers go into great detail and are quite thorough. There are a few short ones that could probably be improved, but overall most of the answers appear helpful.
3. Great subjective questions have a constructive, fair, and impartial tone.
The question presents a real, actual problem the asker faces or has faced. There's no ranting, flamebait, or attempts to create debate or argument. Multiple viewpoints are presented in answers, and again, some of the answers teach the audience how to catch fish and avoids just giving them fish. We see this in Alex N.'s answer.
4. Great subjective questions invite sharing experiences over opinions.
No actual references are used in any answers, but experience definitely plays a role in The Workplace. At least two answers include personal experiences that satisfy our site's back it up rule. Most certainly, some good edits could help other answers meet this guideline as well.
5. Great subjective questions insist that opinion be backed up with facts and references.
We've agreed that answers can be backed with experiences that happened to us personally. Some of the answers may need to be improved in this area. We can use comments to tease these out of answerers, and then edit them back into the posts.
6. Great subjective questions are more than just mindless social fun.
This question's topic is of a very serious nature, and it's one that I picture many interviewees worry about. Under the hood, the question is really about fairness and equality. Is the technique of using a real project to evaluate a candidate fair to that candidate? Is it taking unfair advantage of that person? What does this tell us about the company's culture? These are surely expert level questions, yet they flirt heavily with the boundaries of our site's Q&A model, and they're quite subjective.
We know subjectivity isn't always a bad thing, and looking at the six subjective guidelines from the blog post, it seems this question could very well have a home here. We should strongly reconsider reopening the post with the understanding that all of the answers must support these six guidelines. It's not just the question-asker's responsibility to create great Stack Exchange content; that responsibility also belongs to the answerers and editors as well.