The same hadith is also reported through Muhammad bin Maymun. Ibn al-Mubarak (may Allah have mercy on him) said: "Makes his honour lawful" means that he may be spoken to harshly, and "his punishment" means that he may be imprisoned for it.
Hadith Referenceالسنن الكبرى للبيهقي / كتاب التفليس / 11281