Finding people with too much free time is the entire point of leetcode. Companies want employees who will dedicate their life to their work. If you don't have time to grind leetcode employers feel that you won't have time to work 60 hours a week and spend your free time thinking about work.
I think it's more common that people just have the unexamined assumption that programming skill is more of a natural talent than it is, and also that these tools are an effective way to test for that talent.
I'm sure what you're talking about happens too, but I've seen the other thing first hand a couple times so I know it can be less malicious than that.
I think people have over updated on spending free time on leetcode is the only way to solve these problems, but as a undergrad doing internship interviews, the problems weren't that hard?
