In theory.

In practice, there are many technical glitches which are often preventing this from happening, causing chaos to ensue at the airport when an agent is unable (doesn't know how) or unwilling (misinterpreted the rule) to properly rebuild the Upgrade Standby List, and re-add passengers awaiting an upgrade (if the pax even realize what has happened!).

Hopefully both cases are improving now that UA_Insider has said the company was "sending a memo" (my term) on the issue to line staff. And hopefully the system bugs will get worked out.