It doesn't work because Transparent is anything but. A control is not transparent to a control that it sits over. All Transparent does is tell the control to take on the background properties of the container it sits in. So, your Label sits in the Forms Controls collection and will inherit the background properties of the Form, not any controls it's sitting over the top of.
You'll have to implement your own, custom drawn Label control to add this support or use a third party control you find on the web. There's a couple of good transparent label control article here on CP.
All you have to do is
search for them[
^].
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