By Mitchell A. Kramer

Imagine the following scenario: Your company�s gross margins have shrunk slightly each year for the past several years. The prices at which your products are being sold have also declined. Your profits are down.

The answer: Increase volume, bring in new lines (hopefully with better margins), and motivate your sales force to sell, sell, sell.

But one of your salespeople has reached his or her comfort level. You do not feel he can be moved to work harder or to understand the intricacies of the new lines. Also, you have found a salesman who is aggressive, knows the territory and wants to come with your company. It�s a �no brainer.� Fire your unproductive salesperson, hire the other and watch your bottom line grow.

Your new hire has just celebrated his 41^st birthday, and your outgoing salesman just turned 45. Your employment contract (if you have one, and you should!) allows you to fire on 30 days notice. What�s the problem?

Your now out-of-work ex-employee has nothing but time on his hands. He consults an attorney specializing in age discrimination cases and learns that age 45 puts him in the �protected class.� He is convinced he had done a great job for you. He knows he is the company�s oldest salesman. He has never been given a warning. He has never had his performance criticized.

Your company has just bought itself an age discrimination lawsuit.

First, you will have to defend a complaint brought against you, filed with either the state or federal equal employment opportunity agency. You will pay substantial legal fees, regardless of whether or not you win or even if the claim is unwarranted. The probability is that the governmental agency will investigate, come to no conclusion and issue a document known as a �right to sue� letter. This allows the ex-employee to start suit in Federal Court for age discrimination, which he probably will do. Now you will really pile up legal fees. You may lose or find it less expensive to settle the case.

More and more age discrimination cases are being filed each week, for a number of reasons. The fact is, someone who is fired in his or her 50s may find it very difficult to find a new job. The unemployed worker, feeling that he did a good job and blaming his employer for his predicament, is quite likely to sue.

Incidentally, it is also illegal to discriminate on the basis of age in hiring.

The law dealing with what must be proven in order to win an age discrimination case is still evolving. Statistical evidence of employment practices can be used. That is, if there are no older workers left after the one older worker was fired, that has been held to be enough evidence to presume that the firing was because of age. This can shift the burden to the employer to prove that the firing was not age-related. The jury then decides if the reasons given by the employer are real or contrived.

This article is not intended to teach you all of the law relating to age discrimination. It is intended to tell you when to worry.

Seek legal help as soon as you suspect you may have or may create a problem. I will go further. If you have a problem with any employee, you probably should talk to a knowledgeable lawyer. Better yet, you should set up proper procedures now to avoid problems later.

It�s risky to walk through the land mines of race, age, sex and national origin discrimination, as well as the Americans with Disabilities Act and other state and federal laws dealing with hiring, firing and treatment during employment. There is no way to guarantee that you will not be sued except to have no employees, but preventive legal advice can minimize your risks.

Let us now go back to the 45-year-old you want to fire because his work habits are not compatible with your plans for your company, and the 41-year-old go-getter you want to hire as his replacement.

Assuming that you do not want to simply fire the 45-year-old and risk a lawsuit that you might lose, you have a number of options. You might keep him on, changing his function, his territory or his work habits. If you take this approach, the changes in your employee�s status must be well-documented and accomplished in a non-discriminatory manner.

From a business standpoint, it is usually cheaper and more profitable to salvage an employee rather than letting him go. Older workers may not be as aggressive as younger ones (although that is often the stereotype, not the fact), but they are often steadier, more reliable and more knowledgeable (also stereotypes that may not be true).

If you go the salvage route, you must set up objective procedures and forms to monitor your employees� performance and to give them feedback. That process must apply to all employees. Then, if one of your employees is not able to perform, you can fire with the knowledge that you can justify your actions.

Another possibility is to offer a termination package to the employee you intend to let go. The package would contain releases as well as benefits. If you go this route, you must have an attorney not only draft the agreement, but advise you on how to present the offer.

If you view your employee as unsalvageable, you might consider replacing him with someone at least as old or older. This will not prevent a lawsuit, but may give someone pause before bringing one.

My best advice, however, is to manage your employees by documenting your objectives and their performance against objective. If you are having a problem with an employee, tell him or her and put it in writing or at least memo the employee�s file. An employee who knows he is in trouble and knows the reasons is far less likely to feel discriminated against than one who feels he was ambushed. Your policies and their implementation must be the same for all employees.

A capable attorney can help you develop a plan to more effectively manage your employees while minimizing the risk of a costly lawsuit.

Mitchell Kramer is IMDA general counsel.