Five workers were made redundant in Kaiapoi in Januaryafter their employer, Kiwi Pallets, told them there was a lack of work.
A former employee says the termination seems shifty, because 11 prisoners were employed just after they were let go.
Hare Solomon was one of the five workers whose contracts were terminated on 25 January,two days before the inmates from Rolleston Prison were employed.
Mr Solomon believes the company laid them off in order to replace them with the prisoners, who are cheaper to employ.
Kiwi Pallets told the workers they were being made redundant due to a lack of work, but Mr Solomon says they had more work than they could handle.
Mr Solomon says he has sought legal advice and is seeking compensation for unfair dismissal.