@JustinMicheal-7973
Here are my testing about this one:
When send emails to Exchange on-premise mailbox, user will cannot read email from both Outlook client and OWA directly.
When send emails to Hotmail mailbox, user could read email from both Outlook client and OWA directly.
When send email to Outlook.com mailbox, user cannot read email from Outlook client, they could read this email from OWA directly.
The Exchange tag mainly force on Exchange related question. The sensitivity labels is an function for Office 365. You could double confirm with the Office 365 team. I will also check on this one, if there exist any update about this one, I will update it here.
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