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In this case, the only issue you should consider is the American's with Disabilities Act (ADA). The ADA protects disabled individuals from being discriminated against in the work place. It also states that any employer (with at least 15 employees) must provide "reasonable accommodations" to disabled individuals when requested.
You have not stated that the employee has requested accommodations, as such, you have no obligation to provide them. Also, there may not be a reasonable accommodation that would allow this person to perform adequately.
The fact that he is a vet and is over 40 should have no bearing in this case, since the issues are directly related to his job performance. So the one issue to be cautious of his disability. That said, if he cant' do the job properly, you don't have to keep him on just because he is disabled (unless he has requested an accommodation that would allow him to do the job adequately).
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