This setting behaves differently for email messages and documents. Email Users won't be able to send messages that have this ...

This setting behaves differently for email messages and documents.
Email
Users won't be able to send messages that have this label applied to people outside your organization.
Documents
Users won't be able to share documents that have this label applied with anyone outside the organization. Also, any documents that were previously shared but now have this label applied will be inaccessible to anyone outside the organization.​​