Outlook + unlicensed Exchange = Still sending and receiving emails?

I have a tenant that is using Office 365 Business Essentials. I recently move the licensing distributor, which resulted in the client asking how many licenses and what they are being used for. The client also has access to the admin portal, hence their question.

I log into the admin portal to go over the licensing before I present to the client and notice quite a few accounts are unlicensed that should not be.

I logged into the clients computer and verified they are receiving and sending emails using Exchange. I logged into the admin portal and used message trace to confirm the corresponding messages in Outlook. In the same admin portal, the user I am troubleshooting does not have a license. I tried to login to the users O365 through web browser and I am unable to view email, OneDrive, etc.

The client is using hosted Exchange with no Hybrid set up locally.

This is going on a week or so that I am trying to find out what is going on.

Has anyone else experienced this? Or have any suggestions on what could be causing this? Because I now have a client saying "why should I pay for it if it is working not licensed".

Any help would be GREATLY appreciated.