Rolling out in preview, there's now limited support for labels configured for user-defined permissions. This encryption configuration refers to the settingLet users assign permissions when they apply the labeland the checkboxIn Word, PowerPoint, and Excel, prompt users to specify permissionsis selected:
When a document is labeled with user-defined permissions and uploaded to SharePoint or OneDrive, these services can now process the document so that it can be opened and edited in Office for the web, the label name is displayed in theSensitivitycolumn, and the encrypted file is returned in search results for the label ID.
Labels with this configuration are now displayed in Office for the web. However, currently, users can't apply these labels in Office for the web and if these labels are selected, users see a message instructing them to apply the label using a desktop app.
The contents currently can't be inspected for search, data loss prevention, or eDiscovery.
Windows: Minimum version of 16.0.16327 from Current Channel (Preview), or minimal version of 16.0.16414 from the Beta Channel
macOS: Minimum version of 16.51 from Current Channel (Preview) or from the Beta Channel
Note: If you use earlier versions and co-authoring is enabled for your tenant, AutoSave and co-authoring will be temporarily disabled for documents after users apply a sensitivity label that's configured with user-defined permissions, or users change the permissions. After they close the document and wait 10 minutes, these features are available again.