Microsoft has a feature for Office documents, called “co-authoring” (not enabled by default).
When it is enabled, and a document is open for co-authoring, you are wondering if DLP can still detect labelled content?
Data Loss Prevention where MIP inspection is enabled
Enabling co-authoring changes how labels are stored for Microsoft Office documents.
This is documented in their article on the topic, Enable co-authoring for encrypted documents - Microsoft Purview (compliance) | Microsoft Learn:
After you enable the setting for co-authoring, labeling information for unencrypted files is no longer saved in custom properties.
Do not enable this setting if you use any apps, services, scripts, or tools that reads or writes labeling metadata to the old location.
If co-authoring is enabled, DLP is not able to read MIP labels, however, decryption of MIP documents for content inspection still occurs.
DLP is actively working to support the Microsoft co-authoring feature, in a coming release.