Nested Sensitivity labels issue

Question

Undertaking Sensitivity Label testing before Production rollout .

1.) After initially applying newly created sensitivity labels to a test group, we found that a default label was applying to Emails despite this option being unticked. After applying the Microsoft default labels then re-applying the new labels this issue was resolved; however, the label header on E-mails no longer displays (see Fig 1) (this is now missing despite various attempts to re-publish) - Classification is however shown correctly if you enable the Bar.

2.) We have "User must justify why labels classifications are lowered" - This works 1 out of 10 Times when moving between the newly created "nested labels" but Every time when using the default labels; also when moving from a newly created label to a default label also prompts for justification. (see Fig 2) for our attempts at testing justification by publishing both default and custom labels.

We wish to roll out this Solution to our EMEA Division but at the moment cannot predict the behaviour.

We have found a known issues post that does reference sub labels but it's not an exact match; we are currently working under the assumption that configuring sublabels is not working as expected.

For Label policy config - See Label policy 1,2,3

2: /api/attachments/148019-fig-2-label-justification-not-working-on-nested-la.jpg?platform=QnA