Muting phone notifications over Wi-fi (Fossil Q Marshal)

[AC Question]

In order for the phone to have it's notifications muted, does the bluetooth always have to be on? I have a Fossil Q Marshal and a Droid Turbo. The option for muting phone notification is ON and the app says it is connected to the watch (over wi-fi) but the phone notifications haven't been muted. Anybody else experienced this?

Note: The watch is indeed connected. I do receive notifications. Only the muting does not happen.