• Extension version: v0.58.0
• VSCode Version: 1.75.0
• OS: macOS Ventura 13.2

Steps to Reproduce:

1. Create a PR with a label
2. Click the settings button to display the label dialog
3. Deselect the current label and select another
4. Observe vscode appears to have replaced the label as expected
5. Observe github now shows both labels

Screenshots

Vscode PR with two labels:

Replacing both labels with another via modal in Vscode:

Vscode appears correct:

GitHub now shows all 3 labels: