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Azure Information Protection labels being overrided

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MOD Administrator
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I recently implemented the Azure Information Protection P1 in my tennant.

When I label a document as "Confidential - All Employees" it becomes available to all employees. If I share the document by rightclicking the document and using the "Azure information Protection" Client - and then I classify the Document as "Confidential - All Employees" - and check the "Protect with custom permissions" and choose an email from outside my organisation, it will then override that label and not allow Employees to open the document.

Is this intended?

Does the "Custom Permissions" override these labels on purpose, or is this a mistake on my part?

Thanks in advanced.

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