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Why not? IMO this could be a huge opportunity for some people, since the expectations aren't as high as in a paid gig.
I wouldn't count on it. The people who are getting something for free often have the most unrealistic expectations.
I love how the listing begins with the fact their application is now a paid application after being free for 12 months (so this means they're making some money).

We are a start-up that just launched our premium, paid application

Then they go on to say this is a no-cash gig.

This is a NO CASH gig!

Maybe they're not trying to do anything dodgy here, but we already have an industry fraught with developers being underpaid, pulling incredibly long work hours while their health suffers and this startup is looking for what amounts to slave labour by not offering a single dime to any would be Rails developer. It mentions 15 to 20 hours a week, but who knows if they'll expect more hours once they find someone (especially if they're good).

If this were a charity of some kind or non-profit working on a good cause, then I don't see the problem with it. But this appears to be a startup that has begun making money (how much, who knows) and they're looking for a developer to work for free, for 6 weeks as well. That's just crazy.

They must have bought an expensive ping-pong table with all that money they raised.
Since it's a U.S. company and apparently not a non-profit, wouldn't paying $0/hour be in violation of federal minimum wage laws?

A junior developer who does what he's told by the employer (i.e., doesn't have control over "what will be done and how it will be done"[1]) wouldn't meet the criteria for an independent contractor, so they'd be legally classified as an employee.

[1] http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employ...

I'd assume the contract will be labelled an internship or training to get around that.
In the U.S., interns of for-profit companies are subject to minimum wage laws unless the job is primarily for the educational benefit of the intern (i.e., the company doesn't get any useful labor). It's pretty clear that this company wants to hire a person who already knows their dev stack to do useful work for them. So the employee would need to be paid at least minimum wage.
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