What happens to a file that is labeled, but not protected, if we add encryption to the label at a later date?

Yes, this is another question that I have heard a few times, and I see why it sometimes can seem confusing. And today I was asked again: So, what does happens to a file that has been labeled, but not protected if we add protection to the label later. The answer is that label settings that were applied at the time will not be changed because the label has been changed, I said, and felt pretty sure about this, but I still wanted to make certain. So, to the lab I went.