You can and should discipline employees who refuse to follow directions. Just make sure you document the insubordination.
Recent case: When U.S. Postal Service employee Cherli Montgomery was trained how to handle registered mail, she thought her supervisor gave her erroneous instructions. She was right.
But instead of taking the matter up the chain of command, she simply refused to follow directions and was fired. She sued, alleging discrimination.
The court quickly dismissed her suit after concluding the Postal Service had fired her for insubordination. It didn’t matter that she ultimately was right about how the mail was supposed to be handled. She still had to follow directions. (Montgomery v. Donahoe, No. 09-3720, 7th Cir., 2010)
Final note: This wasn’t a case involving illegal activity—just a dispute over an internal procedure. Refusing to commit an illegal act is different.