The Dunedin City Council voted 10-5 for the policy at a full meeting yesterday.
Concerns about catering for the 60,000 visitors to the city for three Ed Sheeran concerts over the next Easter period, and ensuring retailers make the most of the opportunity, appeared to sway some councillors.
A plan to review the policy after 90 days also helped to get it over the line.
Mayor Dave Cull warned if the council ``get a whiff'' of poor treatment of employees on the day, the ability to open on Easter Sunday ``will be gone''.
First Union spokesman Tali Williams said after the vote working people in Dunedin were ``gutted'' by the decision.
Mr Williams said the council had put the interests of retailers hoping to profit from an Ed Sheeran concert before the interests of retail workers.
Otago Chamber of Commerce chief executive Dougal McGowan said the chamber supported the review that would take place, and planned to help both employees and employers by putting on seminars to make sure everyone had accurate information about the new policy.
``We want to make sure businesses and employees are supported, so they know what those rights and responsibilities are.''
The policy went out for public consultation earlier this year.
Cr Kate Wilson described the hearings committee's job in making a decision as ``fraught''.
Cr Marie Laufiso said she
was very conscious of neo-liberalism and globalisation, which had a big effect on workers.
Cr Christine Garey said people who came to Dunedin for events were likely to ``unload their wallet''.
Cr Rachel Elder said a retailer she had spoken to had said such concerts were big money-makers.
Her heart said keep the day sacrosanct, but her head said otherwise.
Mayor Dave Cull said he found the decision ``exceedingly difficult''.
The council had charged the hearings committee with making a decision, and his default position was to go with that decision.
He said while Ed Sheeran was ``a red herring'', the 60,000 people who would come to Dunedin were not.
Crs Elder, Garey, Doug Hall, Mike Lord, Damian Newell, Staynes, Conrad Stedman, Lee Vandervis, Whiley and Mr Cull voted for the policy.
Crs David Benson-Pope, Hawkins, Laufiso, Jim O'Malley and Wilson voted against.