Issue wiht the downgraing label

Hello, We are experiencing an issue with sensitivity labels configured for SharePoint using Confidential – Encrypted.

When User A uploads a file with this label applied automatically rom the SharePoint library , User B is unable to downgrade the label to a different one and receives an error message. We have confirmed that both User A and User B have the same permissions (Co-author access) to the file and location.

Could you please advise what might be causing this or what additional permissions or configuration may be required?

Any help would be much appreciated.