ALBANY – The city of New York may tax the full income of city employees who live outside its borders, the Court of Appeals ruled yesterday.

Dismissing a 4-year-old lawsuit brought by 13 part-time police surgeons, the high court ruled that the money withheld from the employees’ paychecks is not, legally speaking, a tax but a “condition of employment.” Therefore, the normal constitutional restrictions on taxing nonresidents do not apply, the court said.

The ruling preserves a stream of revenue for the city and assures that all city employees are taxed in the same way, regardless of where they live. It may also discourage nonresidents from taking part-time jobs with city agencies.

The lawsuit did not challenge the city’s right, under Section 1127 of the City Charter, to withhold the equivalent of the city’s income tax from city paychecks. The plaintiffs argued, however, that the levy should not apply to what nonresidents earn from other jobs or to the income of their spouses.

The charter states, however, that nonresident employees must agree to pay an amount “determined as if such person were a resident individual.” The court said this language clearly encompasses the total income of the employee, not just their city salary, and, as a voluntary agreement, does not violate the constitution.

“The court agreed with us that it’s not a tax, nor is it an unconstitutional tax,” a senior counsel in the city’s Law Department, Jane Gordon, said yesterday. “We are happy the court ruled with us in this case because we think it’s the right decision and the right interpretation of the charter provision.”

Although many city workers are required to live within its borders, others, such as police officers, firefighters, and teachers, have no residency requirement. Regardless of where they live, however, all employees must sign contracts agreeing to pay what they would owe in city income taxes if they were residents.

Ms. Gordon said that between 700 and 1,000 new agreements are signed every year. She could not say how many employees live outside the city or what their so-called condition of employment payments add up to.

She acknowledged that the policy might cause some nonresidents to think twice about taking part-time jobs with the city.

“People have to make their own decisions whether or not it’s economically feasible for them to work for the city,” Ms. Gordon said. Some of the plaintiffs in the lawsuit “have been working for the city for 15 years, so I think we can assume it’s economically feasible for them.”

The lawyer for the police surgeons was not immediately available to comment.