We can and for most apps I do this too. But some apps, like this one, require the location or they won't even start. Also at least on android(which also has fine-grained permissions now), this app specifically requires on-going(background?) location access.

Recently this has also been made mandatory for employees, public and private. So organizations have to ensure all employees have this app on their smartphones. We will see how much this is enforced.

You’re better off with Android then because there you can have extensions that send a fake location to specific apps.

If everyone else with the app has location access enabled it is redundant disabling it.

App knows their location, and app knows you’re near them. Location access by proxy.

If you turn off your Bluetooth entirely that should fix it, shouldn't it? Or are they using WiFi as well as Bluetooth?

My Android device allows for completely disabling location access (regardless of whether the app requires it) or for allowing access while the app is in use, as you mentioned. I'm never sure if these features are OEM additions or features in standard/AOSP Android versions, so I guess if you're using an Android device YMMV.