It doesn't conflict with server rules. If it did, the practice would not have been allowed to continue.
Quote:4.7 Official player factions have authority over players of the same NPC affiliation, as long as RP justification is provided. This authority applies in forums and in-game, and applies to player faction diplomacy, and strategic and tactical direction. However, exercise of that authority, on the forums and in game, is restricted to official faction members with the rank of the official faction leader and one rank below him/her. The authority may be exercised through the use of in-game in-RP orders, which, if not obeyed, can result in in-game in-RP consequences (arrest, court martial, and even "lethal" force in extreme circumstances). Official player factions cannot, under any cicrumstances, require another player to follow non-canon RP if that player doesn't want to.
I see you have read the first sentence, as well as the first half of the second sentence, in the bolded part. Unfortunately you have either failed to read or failed to understand the last bit, which is the key.
This means that anyone in [LN] can give you orders, but only the Leader and their SiC can actually enforce those orders. He isn't in violation of the rules for giving you an order. However, he would be if he then shot you for not obeying it.
It wasn't that long ago that the leader of the [LN] was an admin. I'm quite sure that the rest of the admin team would have stopped this practice if they deemed it to be against the rules. However, I'm quite sure I've demonstrated that it is not.