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                                                                   Exhibit 10(b)


                              EMPLOYMENT AGREEMENT

         AGREEMENT made as of December 8, 1998 by and between NovaCare Employee
Services, Inc., a Delaware corporation (the "Company") and Aven A. Kerr (the
"Executive").

                                    RECITALS

         The Company wishes to retain the services of the Executive in the
capacity of Executive Vice President and Chief Operating Officer, and the
Executive wishes to serve in the employ of the Company in that capacity, upon
the terms and conditions hereinafter set forth.

         NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:

         1.       Employment, Term, Automatic Extension.

                  1.1 Employment. The Company agrees to employ the Executive,
and the Executive agrees to serve in the employ of the Company, for the term set
forth in Section 1.2, in the position and with the responsibilities, duties and
authority set forth in Section 2 and on the other terms and conditions set forth
in this Agreement.

                  1.2 Term. The term of the Executive's employment under this
Agreement shall be the period commencing on December 8, 1998 and ending on
December 7, 2000, unless sooner terminated in accordance with this Agreement.

                  1.3 Automatic Extension. As of December 7, 1999, and as of
each subsequent December 7 (each an "Automatic Renewal Date"), unless either
party shall have given a notice of non-extension prior to such Automatic Renewal
Date, the term of this Agreement shall extended automatically for a period of
one year to the anniversary of the expiration date of the then-current term of
this Agreement. Once a notice of non-extension shall have been given by either
party, there shall be no further automatic extension of this Agreement.

         2.       Position, Duties.

                  Executive shall serve in the positions of Executive Vice
President and Chief Operating Officer. The Executive shall perform, faithfully
and diligently, such duties, and shall have such responsibilities appropriate to
said positions, as shall be assigned to him from time to time by the Chief
Executive Officer and the Board of Directors of the Company. The Executive shall
report to the Chief Executive Officer of the Company. The Executive shall devote
his full business time and attention to the performance of his duties and
responsibilities hereunder.

         3.       Compensation.

                  3.1 Salary. In consideration of the performance by the
Executive of the services set forth in Section 2 and the Executive's observance
of the other covenants set forth herein, the Company shall pay the Executive,
and the Executive shall accept, an annualized base salary of $250,000, payable
on a bi-weekly schedule in accordance with the Company's regular payroll
practices. The Executive shall be entitled to such increases in base salary
during the term hereof as shall be determined by the Chief Executive Officer of
the Company and approved by the Compensation Committee of the Board of Directors
of the Company in their sole discretion.

                  3.2 Bonus. In addition to the base salary provided for in
Section 3.1, the Executive shall be eligible for an incentive bonus target of
50% of base salary with respect to each fiscal year of the Company ending during
the term of this Agreement, payable in accordance with the terms of the
Company's Executive Incentive Compensation Plan based on attainment of stated
objectives.

                  3.3 Stock Options. The Executive shall be eligible to receive
options to purchase the Company's common stock, $.01 par value, and the common
stock of subsidiaries of the Company (such options


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with respect to the stock of the Company and its subsidiaries, together with
such options heretofore granted to the Executive, being hereinafter referred to
as the "Options") in accordance with the Company's policies and procedures
relating to the grant of options, subject to the authority of the Board of
Directors of the Company and the board of directors of any subsidiary to make
such awards in their sole discretion. The Options shall have such terms and
conditions as the cognizant board of directors shall determine, provided that
all Options shall become exercisable in full upon a Change in Control of the
Company (as defined in Section 6.6), whether or not the employment of the
Executive shall be terminated, and, in such case, shall remain exercisable for
the balance of their stated term.

                  3.4 Supplemental Benefits Plan. The Executive shall be
entitled to participate in the Company's Supplemental Benefits Plan (the "Plan")
as a Level I Executive with full vesting in the Company's match under the Plan
after five (5) years of participation in the Plan.

         4.       Expense Reimbursement.

         During the term of this Agreement, consistent with the Company's
policies and procedures as in effect from time to time, the Company shall
reimburse the Executive for all reasonable and necessary out-of-pocket expenses
incurred by the Executive in connection with the performance of the Executive's
duties and responsibilities hereunder, upon the presentation of proper accounts
therefor in accordance with the Company's policies.

         5.       Other Benefits.

         During the term of this Agreement, the Executive shall be entitled to
receive such benefits as are from time to time made available to other similarly
situated Executives of the Company on the same terms as are available to such
similarly situated Executives in accordance with the provisions of the Company's
benefit plans in effect from time to time, it being understood that the
Executive shall be required to make the same contributions and payments in order
to receive any of such benefits as may be required of such similarly situated
Executives.

         6.       Termination of Employment.

                  6.1 Death. In the event of the death of the Executive during
the term of this Agreement, the Company shall pay to the estate or other legal
representative of the Executive (a) the base salary provided for in Section 3.1
accrued to the Executive's date of death and not previously paid and (b) any
bonus which shall be or become payable pursuant to Section 3.2. Rights and
benefits of the estate or other legal representative or transferee of the
Executive (a) with respect to the Options shall be determined in accordance with
Section 3.3 and (b) under the benefit plans and programs of the Company shall be
determined in accordance with the provisions of such plans and programs. Neither
the estate or other legal representative of the Executive nor the Company shall
have any further rights or obligations under this Agreement, except as provided
in Section 15.

                  6.2 Disability. If the Executive becomes incapacitated by
reason of sickness, accident or other physical or mental disability and is for a
period of six (6) consecutive months unable to perform the essential functions
of his position hereunder, the employment of the Executive may be terminated by
the Company upon thirty (30) days' prior written notice to the Executive.
Promptly after such termination, the Company shall (a) pay to the Executive the
base salary provided for in Section 3.1 accrued to the date of such termination
and not previously paid and (b) pay to the Executive any bonus which shall be or
become payable under Section 3.2. Rights and benefits of the Executive or his
transferee (a) with respect to the Options shall be determined in accordance
with Section 3.3 and (b) under the benefit plans and programs of the Company
shall be determined in accordance with the provisions of such plans and
programs. Neither the Executive nor the Company shall have any further rights or
obligations under this Agreement, except as provided in Sections 7, 8, 9 and 15.


                  6.3 Due Cause. The employment of the Executive may be
terminated by the Company at any time during the term of this Agreement for Due
Cause (defined below). In the event of such termination, the


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Company shall pay to the Executive the base salary provided for in Section 3.1
accrued to the date of such termination and not previously paid to the
Executive. The Company shall also pay to the Executive any bonus which shall be
or become payable to the Executive under Section 3.2 with respect to any fiscal
year of the Company ended prior to the date of such termination. For purposes
hereof, "Due Cause" means (a) a material breach of any of the Executive's
obligations hereunder (it being understood that any breach of the provisions of
Sections 2, 7 or 8 hereof shall be considered material); (b) willful failure to
carry out his duties hereunder, or gross misconduct; or (c) that the Executive
has been charged with any felony or with any lesser crime or offense involving
moral turpitude, or has been banned from participation in the Medicare/Medicaid
program. Before terminating Executive for Due Cause, Company shall notify
Executive of the grounds for such termination and, if such grounds are
susceptible to cure, shall provide Executive Thirty (30) days during which to
cure any such grounds. If Executive shall fail during such period to cure the
grounds, Executive's termination shall be effective as of the date of the notice
provided hereunder. Rights and benefits of the Executive or his transferee (a)
with respect to the Options shall be determined in accordance with Section 3.3
and (b) under the benefit plans and programs of the Company shall be determined
in accordance with the provisions of such plans and programs. After the
satisfaction of any claim of the Company against the Executive arising as a
result of such Due Cause, neither the Executive nor the Company shall have any
further rights or obligations under this Agreement, except as provided in
Sections 7, 8 and 9.

                  6.4 Termination by the Company Without Cause. The Company may
terminate the Executive's employment prior to the expiration of the term of this
Agreement for whatever reason it deems appropriate; provided, however, that in
the event that such termination is not pursuant to Sections 6.1, 6.2 or 6.3:

                           (i) The Company shall continue to pay to the 
Executive (or his estate or other legal representative in the case of the death
of the Executive subsequent to such termination), in the same periodic
installments as his base salary was paid, the base salary provided for in
Section 3.1 (at the annual rate then in effect), until the first to occur of (a)
the then scheduled expiration of the term hereof or (b) the expiration of a
period of one (1) year following such termination (the applicable period
hereinafter being referred to as the "Severance Period"); provided further, that
such periodic installment payments by the Company shall cease as of the date
Executive obtains alternative employment which does not conflict with Section
8.1(a) of this Agreement, except that, if such employment is at a rate of
compensation less than that required hereunder, Company shall continue to pay
the difference between the compensation payable under this section 6.4(i) and
the compensation Executive actually receives in his non-conflicting position for
the remainder of the Severance Period;

                           (ii)  Executive shall become fully vested in the 
Options; and

                           (iii) Executive shall continue to receive during the
Severance Period, to the extent permitted by law, the same health, disability
and life insurance benefits as Executive was receiving on the date of
termination, provided that Executive shall continue to make the same
contributions toward such coverage as Executive was making on the date of
termination, with such adjustments to contributions as are made generally for
all Executives.

                           (iv) The Executive shall receive a payment equal to
the lesser of the prior fiscal year's bonus or 50% of the current salary.

                  6.5 Rights to Benefits. Upon termination of employment under
any provision contained in this Section 6, except section 6.4, rights and
benefits of the Executive, his estate or other legal representative under the
Executive benefit plans and programs of the Company, if any, will be determined
in accordance with the terms and provisions of such plans and programs. Neither
the Executive nor the Company shall have any further rights or obligations under
this Agreement, except as provided in Sections 7, 8 and 9.



                  6.6 Termination of Employment Following a Change in Control.
Anything herein to the contrary notwithstanding, if the Executive during the one
(1) year period following a Change in Control is terminated or subjected to a
material change in the conditions of employment, including demotion, salary
reduction, reduction in



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job responsibilities, or change in job location of more than 50 miles, then such
termination or material change in conditions of employment shall constitute a
termination of the Executive's employment by the Company pursuant to Section 6.4
(Termination by the Company Without Cause) and the severance amounts referred to
in paragraphs (i) and (iv) of Section 6.4 shall be paid to the Executive in a
lump sum on the date of termination. For purposes of this Agreement, a Change in
Control of the Company shall be deemed to have occurred if:6.6

                           (i) a "person" (meaning an individual, a partnership,
or other group or association as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, other than the Executive or a group including
the Executive), either (x) acquires twenty percent (20%) or more of the combined
voting power of the outstanding securities of the Company having a right to vote
in elections of directors and such acquisition shall not have been approved
within sixty (60) days following such acquisition by a majority of the
Continuing Directors (as hereinafter defined) then in office or (y) acquires
fifty percent (50%) or more of the combined voting power of the outstanding
securities of the Company having a right to vote in elections of directors; or

                           (ii) Continuing Directors shall for any reason cease
to constitute a majority of the Board of Directors of the Company; or

                           (iii) all or substantially all of the business and/or
assets of the Company are disposed of by the Company to a party or parties other
than a subsidiary or other affiliate of the Company, pursuant to a partial or
complete liquidation of the Company, sale of assets (including stock of a
subsidiary of the Company) or otherwise.

         For purposes of this Agreement, the term "Continuing Director" shall
mean a member of the Board of Directors of the Company who either was a member
of the Board of Directors on the date hereof or who subsequently became a
Director and whose election, or nomination for election, was approved by a vote
of at least two-thirds of the Continuing Directors then in office.

         7.       Confidential Information.

                  7.1 (a) The Executive shall, during the Executive's employment
with the Company and at all times thereafter, treat all confidential material
(as hereinafter defined) of the Company or any other member of the Company Group
(as hereinafter defined) confidentially. The Executive shall not, without the
prior written consent of the Chairman of the Company, disclose such confidential
material, directly or indirectly, to any party, who at the time of such
disclosure is not an employee or agent of any member of the Company Group, or
remove from the premises of the Company or any other member of the Company Group
any notes or records relating thereto, copies or facsimiles thereof (whether
made by electronic, electrical, magnetic, optical, laser, acoustic or other
means), or any other property of any member of the Company Group. The Executive
agrees that all confidential material, together with all notes and records of
the Executive relating thereto, and all copies or facsimiles thereof in the
possession of the Executive (whether made by the foregoing or other means), are
the exclusive property of the Company Group. The Executive shall not in any
manner use any confidential material of the Company Group, or any other property
of any member of the Company Group, outside of the scope of the Executive's
duties and responsibilities under this Agreement or in any way that is
detrimental to any member of the Company Group.

                      (b) For the purposes hereof, the term "confidential
material" means all information in any way concerning the activities, business
or affairs of any member of the Company Group or any of the customers or clients
of any member of the Company Group, including, without limitation, information
concerning trade secrets, together with all sales and financial information
concerning any member of the Company Group and any and all information
concerning projects in research and development or marketing plans for any
products or projects of the Company Group, and all information in any way
concerning the activities, business or affairs of any of such customers or
clients, which is furnished to the Executive by any member of the Company Group
or any of its agents, customers or clients, or otherwise acquired by the
Executive in the course of the Executive's employment with the Company;
provided, however, that the term "confidential material" shall not include
information which (i) becomes generally available to the public other than as a
result of a disclosure by the Executive, (ii) was available to



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the Executive on a non-confidential basis prior to his employment with any
member of the Company Group or (iii) becomes available to the Executive on a
non-confidential basis from a source other than any member of the Company Group
or any of its agents, customers or clients, provided that such source is not
bound by a confidentiality agreement with any member of the Company Group or any
of such agents, customers or clients.

                      (c) For purposes hereof, the "Company Group" means, 
collectively, the Company and its subsidiaries.

                  7.2 Promptly upon the request of the Company, the Executive
shall deliver to the Company all confidential material in tangible form relating
to any member of the Company Group in the possession of the Executive, without
retaining a copy thereof, unless, in the opinion of counsel for the Company,
either returning such confidential material or failing to retain a copy thereof
would violate any applicable federal, state, local or foreign law, in which
event such confidential material shall be returned without retaining any copies
thereof as soon as practicable after such counsel advises that the same may be
lawfully done.

                  7.3 If Executive is required, by deposition, interrogatories,
requests for information or documents, subpoena, civil investigative demand or
similar process, to disclose any confidential material relating to any member of
the Company Group, the Executive shall provide the Company with prompt notice
thereof so that the Company may seek an appropriate protective order and/or
waive compliance by the Executive with the provisions hereof; provided, however,
that if in the absence of a protective order or the receipt of such a waiver,
the Executive is, in the opinion of counsel for the Company, compelled to
disclose confidential material not otherwise disclosable hereunder to any
legislative, judicial or regulatory body, agency or authority, or else be
exposed to liability for contempt, fine or penalty or to other censure, such
confidential material may be so disclosed.

         8.       Non-Competition.

                  8.1 The Executive acknowledges that the services to be
rendered by the Executive to the Company are of a special and unique character.
The Executive agrees that, in consideration of (a) his employment hereunder, (b)
the Company's agreement to pay severance hereunder in the event of termination
pursuant to Section 6.4 hereof and (c) the Company's agreement to vest matching
contributions in the Plan after five (5) years of participation in the Plan by
the Executive pursuant to Section 3.4 hereof, Executive shall not, (aa) prior to
one year following the date of termination of the Executive's employment by the
Company or any other member of the Company Group (i) engage, whether as
principal, agent, investor, distributor, representative, stockholder (other than
as the holder of not more than five percent (5%) of the stock or equity of any
corporation the capital stock of which is publicly traded), employee,
consultant, volunteer or otherwise, with or without pay, in any activity or
business venture, anywhere within the United States, which is competitive with
the business of the Company Group on the date of termination, (ii) solicit or
entice or endeavor to solicit or entice away from any member of the Company
Group any person who was a director, officer, employee, agent or consultant of
such member of the Company Group, either on such Executive's own account or for
any person, firm, corporation or other organization, whether or not such person
would commit any breach of such person's contract of employment by reason of
leaving the service of such member of the Company Group, (iii) solicit or entice
or endeavor to solicit or entice away any of the clients or customers of any
member of the Company Group, either on such Executive's own account or for any
other person, firm, corporation or organization, or (iv) employ any person who
was a director, officer or employee of any member of the Company Group or any
person who is or may be likely to be in possession of any confidential
information or trade secrets relating to the business of any member of the
Company Group, or (bb) at any time, take any action or make any statement the
effect of which would be, directly or indirectly, to impair the good will of any
member of the Company Group or the business reputation or good name of any
member of the Company Group, or be otherwise detrimental to the Company,
including any action or statement intended, directly or indirectly, to benefit a
competitor of any member of the Company Group.

                  8.2 The parties hereto agree that if, in any proceeding, the
court or other authority shall refuse to enforce the covenants herein set forth
because such covenants cover too extensive a geographic area or too long a
period of time, any such covenant shall be deemed appropriately amended and
modified in keeping with the intention of the parties to the maximum extent
permitted by law.



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                  8.3 The Executive expressly acknowledges and agrees that the
covenants and agreements set forth in this Section 8 are reasonable in all
respects, and necessary in order to protect, maintain and preserve the value and
goodwill of the businesses of the Company Group, as well as the proprietary and
other legitimate business interests of the members of the Company Group. The
Executive acknowledges and agrees that the covenants and agreements of the
Executive set forth in this Section 8 are a material reason for the payment of
the compensation and benefits provided for in this Agreement.

         9.       Equitable Relief. In the event of a breach or threatened
breach by the Executive of any of the provisions of Section 7 or 8 of this
Agreement, the Executive hereby consents and agrees that the Company shall be
entitled to pre-judgment injunctive relief or similar equitable relief, designed
to maintain the status quo ante pending arbitration under Section 19 of this
Agreement, by restraining the Executive from committing or continuing any such
breach or threatened breach or granting specific performance of any act required
to be performed by the Executive under any of such provisions, without the
necessity of showing any actual damage or that only damages would not afford an
adequate remedy and without the necessity of posting any bond or other security.
The parties hereby consent to the jurisdiction of the federal courts located in
the Eastern District of Pennsylvania and the state courts operating within the
geographical area included in such District for any proceedings under this
Section 9.

         10.      Successors and Assigns.

                  10.1 Assignment by the Company. The Company may assign this
Agreement to any affiliate of the Company.

                  10.2 Assignment by the Executive. The Executive may not assign
this Agreement or any part thereof without the prior written consent of the
Chairman of the Company, and any attempted or purported assignment in the
absence of such consent shall be null and void.

         11.      Governing Law. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the laws of
the Commonwealth of Pennsylvania applicable to contracts to be performed
entirely within such Commonwealth.

         12.      Entire Agreement. This Agreement contains all the 
understandings and representations between the parties hereto pertaining to the
subject matter hereof and supersede all undertakings and agreements, whether
oral or in writing, previously entered into by them with respect thereto.

         13.      Modification and Amendment; Waiver. The provisions of this
Agreement may be modified, amended or waived, but only upon the written consent
of the party against whom enforcement of such modification, amendment or waiver
is sought and then such modification, amendment or waiver shall be effective
only to the extent set forth in such writing. No delay or failure on the part of
any party hereto in exercising any right, power or remedy hereunder shall effect
or operate as a waiver thereof, nor shall any single or partial exercise thereof
or any abandonment or discontinuance of steps to enforce such right, power or
remedy preclude any further exercise thereof or of any other right, power or
remedy.

         14.      Notices. All notices, requests or instructions hereunder shall
be in writing and delivered personally, sent by telecopier or sent by registered
or certified mail, postage prepaid, as follows:


                  If to the Executive:

                           Aven A. Kerr
                           1533 Sumneytown Pike
                           Ambler, Pa. 19002
                           Telephone: 215-699-5134




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                  If to the Company:

                           NovaCare, Inc.
                           1016 West Ninth Avenue
                           King of Prussia, Pennsylvania 19406
                           Attention: Chief Executive Officer
                           Telephone: (610) 992-7400
                           Telecopy: (610) 992-3330

                  With a copy to:

                           NovaCare, Inc.
                           1016 W. Ninth Avenue
                           King of Prussia, Pennsylvania 19406
                           Attention: General Counsel
                           Telephone: (610) 992-7404
                           Telecopy: (610) 992-3396

Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered or telecopied, and two business days after the date of
mailing, if mailed.

         15.      Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.

         16.      Expenses. Each of the parties hereto shall bear his or its own
costs and expenses, including attorneys' fees and disbursements, incurred in
connection with this Agreement and the transactions contemplated hereby.

         17.      Titles. Titles of the sections of this Agreement are intended
solely for convenience and no provision of this Agreement is to be construed by
reference to the title of any section.

         18.      Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.

         19.      Arbitration. The parties shall attempt amicably to resolve
disagreements and disputes hereunder by negotiation. If the matter is not
amicably resolved through negotiation, within thirty (30) days after written
notice from either party, any controversy, dispute or disagreement arising out
of or relating to this Agreement, or the breach thereof, shall be subject to
exclusive, final and binding arbitration, which shall be conducted in
Philadelphia, PA, in accordance with the J.A.M.S./Endispute rules for employment
arbitration. Any party may bring a court action to compel arbitration under this
Agreement or to enforce an arbitration award.



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         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.


COMPANY:

                                             -----------------------------------


                                             By
                                               ---------------------------------
                                                Name:
                                                Title:

EXECUTIVE:

                                             -----------------------------------




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