The Pharisees are speaking here of the oral tradition (the Talmud and the Kabbalah before it was written), they believe that when Moses decend from Mount Sinai bring the ten commanments (written tradition), but also an oral teaching which passed to Joshua and the elders, then the prophets and so on (Robert Goldberg, Talmud, Back to the Sources: Reading the Classic Jewish Texts (New York: Simon and Schuster, 1984), p. 130).
All they are doing is adding commandments to the Torah
We have explained long ago, that the washing and bathing of the hands are derived from the words of the scribes. (Hilchoth Mikvaoth, xi. 1.)
Rebelling against God and God's word
Ye shall not add unto the word which I command you, neither shall ye diminish ought from it, that ye may keep the commandments of the LORD your God which I command you. (Deuteronomy 4:2 AV)
What thing soever I command you, observe to do it: thou shalt not add thereto, nor diminish from it. (Deuteronomy 12:32 AV)
The penalty or punishment of breaking this traditions could be excommunication
It is necessary to be very careful in washing of hands, for every one who despises the washing of hands is guilty of excommunication. (Orach Chaiim., 158.)
A case actually occurred of an excommunication, and who dying in his excommunication had the usual indignities offered to his corpse
Whom did they excommunicate ? Eleazar ben Chatzar, who despised the washing of hands ; and when he was dead, the tribunal sent, and had a great stone laid on his coffin, to teach thee that of everyone who is excommunicated and dies in his excommunication, the coffin is stoned by the tribunal. (Talmud, Berachoth, fol. 19, col. 1.)
Every one who despises washing of hands sinks into poverty. R. Zerika says, in the name of li. Eliezer, Every one that despises the washing of hands is rooted out of the world. (Orach Chaiim., ibid.)
Or the penalty could be even worst, because they equate the transgression of this commandment with that of gross immorality.
Every one who eats bread without washing of hands, is as guilty as if he had committed fornication.(Sotah, fol. iv.,col. 2.)
Why they do that? Because they are full of superstitions
A man must be very careful in pouring water on his hands three times for an evil spirit rests upon the hands before washing, and does not depart until water be poured on them three times. Therefore it is necessary, before washing, to abstain from touching the hand to the mouth, and the nose, and the ears, and the eyes, because an evil spirit rests upon them. (Orach Chaiim., 4.)
And do not have any regard for God or His word
Thus the tales related to the Torah are simply her outer garments, and woe to the person who regards that outer garb as the Torah itself! For such a person will be deprived of a portion in the world to come.(Lawrence Fine, Chapter on Kabbalistic Texts, From: Back to the Sources: Reading the Classic Jewish Texts (“The First Complete Modern Guide to the Great Books of the Jewish Tradition: What They Are and How to Read Them”), at p. 337 (2006) (quoting Zohar III, 152a).
Jesus disagree with the Pharisees and the oral law quoting Isaiah 29:13 and for that they wanted to kill Him (not exactly in this incident)
Whosoever transgresses the words of the Sages deserves to die (Babylonian Talmud: Tractate Berakoth, Folio 4b, Translated into English with Notes,
Glossary and Indices by Maurice Simon, M.A., Under the Editorship of Rabbi Dr I. Epstein B.A., Ph.D., D. Lit. (1961))