outlook 2011 mac keeps asking for password exchange

The Outlook connection status shows that all connections are being made to office 365 and not the local exchange server. I've verified on my test accounts that there are no saved passwords in credential manager. These are domain joined PC's so there was never any saved password in credential manager. Logging in to also works for these test users. I would like to not have to create new mail profiles for all users. If I create a new mail profile then Outlook will ask for the password once as normal, and then everything works fine. All I can do is click cancel on the password prompt and them I'm able to continue.

Any time I attempt to perform any action like starting a new email message I will be asked for the password again. The migration succeeds and it looks like Outlook is able to auto reconfigure to connect to office 365 but Outlook will constantly ask for the password and will not accept any password. I've migrated a couple of test mailboxes to Office 365 to test the migration process. Users are using Outlook 2013 to connect to exchange. We have a hybrid connection between our exchange 2013 environment and office 365.

Outlook 2011 mac keeps asking for password exchange