I created and published a sensitivity label that should prevent external sharing (outside of the organization). I was able to assign label to a SharePoint site and individual files in the document library. I still can share a file via email link with any user outside of the organization.
I know that sensitivity info types are working. I was able to create a DLP policy based on sensitivity info type that prevents external sharing. After applying this policy, I was not able to share a file with external user.
Please let me know if I'm missing something with labels.