The bypass gets wired in with the fan module, not the switch. The bypass connects the neutral and hot/load of the light wire together.
Yellow = Neutral
Black from Junction box = Hot/Load
Blue = Light Hot
Red = Fan Hot
The bypass is essentially just a 14KOhm resistor that lets a little bit of current bypass the LED. They are usually used in neutral-less locations but also useful for dimmers when the LEDs don’t present enough of a load for the dimmer to work right. In this case it is acting like a pull-down resistor, dropping that “off” voltage down low enough that the LEDs won’t light. By my measurement with the bypass installed the “off” voltage drops to 10V.
The downside is it appears to have made the flicker described in LZW36 - Slight Flicker worse as the bypass helps the LEDs turn off faster 