Touch ID fails when external monitor attached
Using a 2020 M1-based MacBook Air, I find that Touch ID fails when I connect it to my external monitor via a Thunderbolt dock.
Setup: MacBook Air M1 running macOS 12.1 -> CalDigit TS3 Plus dock -> external monitor connected via DisplayPort. An Apple Magic Trackpad 2 is connect via Bluetooth, no external keyboards are used. The lid of the MacBook Air is open and I am using the laptop keyboard and Touch ID.
If I use the MacBook Air by itself, not connected to the dock, Touch ID works as expected 100% of the time.
Once I connect the MacBook Air to the dock in order to use the monitor, Touch ID simply fails 100% of the time and I must enter my password. This applies to all items, such as website logins or software updates.
As soon as I disconnect from the dock, Touch ID works again immediately. I understand how Touch ID might not like external keyboards, but this is not the case here. This issue has persisted across several OS updates.
Any ideas? Is the CalDigit TS3 Plus a problem here?