This study documents two empirical regularities, using data for Denmark and Portugal. First, workers who are hired last, are the …rst to leave the …rm (Last In, First Out; LIFO). Second, workers' wages rise with seniority (= a worker's tenure relative to the tenure of her colleagues). We seek to explain these regularities by developing a dynamic model of the …rm with stochastic product demand and hiring cost (= irreversible speci…c investments). There is wage bargaining between a worker and its …rm. Separations (quits or layo¤s) obey the LIFO rule and bargaining is e¢ cient (a zero surplus at the moment of separation). The LIFO rule provides a stronger bargaining position for senior workers, leading to a return to seniority in wages. E¢ ciency in hiring requires the workers'bargaining power to be in line with their share in the cost of speci…c investment. Then, the LIFO rule is a way to protect their property right on the speci…c investment. We consider the e¤ects of Employment Protection Legislation and risk aversion.