Union contracts for 40,000 AT&T workers expired at midnight, but a strike was averted with officials saying early Sunday that talks were continuing.
Though expiration of the deadline left the Communications Workers of America free to call a walkout, spokeswoman Candice Johnson said employees would report for work without a contract.
"Workers are keeping their option to strike open," she said.
AT&T spokesman Marty Richter also said talks were ongoing. He said earlier that the company has been planning for the possibility for a strike for two years, and managers and vendors will step in to keep service running if there is one.
At issue in the negotiations are job protection clauses and health care premiums and co-payments. AT&T says it wants employees to shoulder more of their growing health care costs and more leeway to downsize its shrinking landline operations. Some of its workers have contracts that guarantee them job offers at different parts of the company if they're laid off.
Union organizers point to the overall financial health of the company, which posted a profit of $4 billion for last year.
Four separate contracts in eastern, Midwestern and Western areas covering some 40,000 workers in total expired.
The workers are on the shrinking local-phone and long-haul data side of the business.
Three years ago, the parties kept talking past the contract expiration, and reached agreements without a strike.
Dallas-based AT&T Inc. is the country's largest employer of unionized workers. About 140,000 of its 256,000 employees are union members.