If you see the following pop when trying to Save a Letter (see screenshot below).
This document is saved with an older file type with limited functionality. Choose a modern file type to enable sensitivity labels.
Try the Convert option.
Alternatively update all of your Medilink Letter Templates (LETTERS folder, MAINA.DOCX etc) such that they no longer have Compatibility Mode enabled. You do this via File -> Info -> Compatibility Mode -> Convert (as per screenshot further below).