She's doing it because they are small, move and sound like prey. A dog can not tell a kitten from a squirrell or a mouse. They make no distinction between something their human loves and a wild creature. She is not doing to make more space for herself(although from your other post over-crowding is certainly an issue). She is doing it because she can--she has the opportunity and frankly, it's probably fun for her! Hunting is fun for many dogs.

It needs to be made very clear that this IS NOT aggressive behavior. There is a huge difference between aggression and prey drive. Some breeds are more prone to prey drive, some individual dogs are have a high prey drive regardless of their breed. It is not aggressive. It's instinct. Your sister's lab is no more like now than she ever was to bite a human.

My own dogs have killed one of my cats. They are sweet, gentle dogs who show no aggression towards humans of any size. They did it not because they wanted to hurt Dominique or to make more room in their territory. They did not do it hurt me. They did it because they are dogs and Dominique got to an area she wasn't supposed to be in. She was simply prey to them. She was not part of their pack when she was out of the house, despite the fact that they had lived with her for five years. Would my dogs kill another cat given the chance? Absolutely, so will this lab. The only way to stop it is to not leave them alone together--ever, not for a second.