This is a perfectly legal slam, and truth be told, for an 8th grader, rather impressive form. The fact that the kid steps to the side and squares his hips before he lifts is something that should get drilled over and over for proper lifting technique. You can't help that the 2nd kid has his arm trapped inside. That's almost like saying the lifting wrestler should move the lifted wrestler's arm out of the way in order to give him a fair chance of defense, and that's just foolish. As someone pointed out earlier, that's why they wrestle on the cushioned mat.
Also, the comments being made about the skill level of the match is absurd. If that was the case in wrestling you'd be split up by weight class and grade for all competitions. Also, there is no way for a referee to have knowledge of each kids skill level and use that in judgement of calls. Each person is equal when they toe the line, that is what makes wrestling.......wrestling.