There are AC employee passes that allow for space-available J travel. Presumably they have a priority that is above non-confirmed upgraders, but of course, will not permit them to sit in J if the aircraft is truly overbooked in its entirety, or if J is oversold with confirmed passengers.

So in an op-upgrade scenario, the AC employee J pass travellers would still have priority over op-upgraders, unless both J and Y seating has been exhausted.

The "upgrade" list, as explained in various other threads, is different than that of the "standby" list (J standby implies that a passenger has an entitlement to fly in the J cabin by paying a fare/J AP reward or being on a J pass), and "upgrade" priorities are different than standby priorities. The standby list is cleared before the upgrade priorities come into effect.