Verified password sync is disabled via using PowerShell
Following cmdlets have been used to verify above and I noticed password sync was in fact disabled although I checked the option in Azure AD connect setup.
Import-Module ADSync
Get-ADSyncAADPasswordSyncConfiguration -SourceConnector <‘LOCAL DOMAIN NAME>
Enabled password sync via PowerShell
Set-ADSyncAADPasswordSyncConfiguration -SourceConnector <‘LOCAL DOMAIN NAME> -TargetConnector <‘xxxxxxx.onmicrosoft.com – AAD’> -Enable $true
thanks to: http://www.tekronin.net/2015/10/09/office-365-woes-password-sync-doesnt-synchronize-with-azure-ad-connect/
Office 365 woes | Password Sync doesn’t synchronize with Azure AD Connect
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