So basically if a good programmer is spending his time with family and kids or doing something other than programming in his non-work time, then you will not hire him?

Programming outside business hours is great way to learn new skills and try out things that will never come as part of your day job. For example, my day job would never include any mobile app development. So I do it as a side project. In fact lot of people have developed lot of cool projects this way (outside work).

However saying this is the only way to tell a programmer is good is taking it too far. Like Jacquesm mentions people might have other interesting things to do or on the other hand people can suck equally bad in their 'other' projects too :)