I can confirm I see the same issue. And worth noting that it's a problem both with -h and without -h, but only when specifying alternate credentials. When using -s with alternate credentials, it does not occur. Also, when using integrated security (no alternate credentials) it does not occur.

To be clear, both of these commands fail with the same error ( Logon failure: the user has not been granted the requested logon type at this computer. ):

psexec \\RemoteSystem -h -u administrator -p password c:\demoprogram.exe

psexec \\RemoteSystem -u administrator -p password c:\demoprogram.exe

However, this command does not fail:

psexec \\RemoteSystem -s -u administrator -p password c:\demoprogram.exe