Custom label disables all filter labels

If I use filter label to change icon color of all recently modified files and then set a label explicitly via Properties SETLABEL=Highlight, the filter label is off. Is it intentional? Can I have both working at the same time and let's say explicitly assigned label be most important?

Turn on the Preferences / Favorites and Recent / Labels / Apply wildcard and label filters to explicitly labelled files and folders option.

Thanks, this is what I was missing.