The people of Neuchâtel voted in favour of bringing in a minimum wage back in 2011, and the cantonal government later decided on a figure of 20 francs.
However its introduction was suspended after several professional organizations and private individuals challenged the plan in court.
But on Friday the Swiss Federal Court in Lausanne rejected the appeal, saying that the proposed minimum wage of 20 francs “conforms to the constitutional principle of economic freedom and to federal law”.
In a statement, the court said the canton had the right to introduce social policy measures, and that the introduction of a minimum wage was in part motivated by social aims.
The minimum wage aimed to guarantee every worker a decent standard of living without having to resort to social welfare, therefore fighting against the phenomenon of ‘working poor', it said.
However to ensure that the minimum wage does not encroach upon economic freedom, the level should be set relatively low, which is the case here, it said.
At 20 francs an hour (currently 17 euros), Neuchâtel's minimum wage would be far higher than elsewhere in Europe and North America.
Germany's minimum wage for 2017 is 8.84 euros per hour, while the UK's is £7.50 (8.20 euros). The US federal hourly minimum is currently $7.25 (6.1 euros), though many states have set higher rates.
In Switzerland, two other cantons – Jura and Ticino – have also voted in favour of a minimum wage but have not yet introduced it.
Other cantons including Geneva, Vaud and Valais have refused similar ideas.
And in 2014 Swiss voters overwhelmingly rejected the idea of a minimum wage at national level.
The ‘decent salary' initiative wanted to set a base hourly rate of 22 francs (19 euros/$22) an hour, or 4,000 francs a months.
Last year voters also rejected a popular initiative calling for a unconditional basic income of 2,500 francs, regardless of whether a person worked or not.