I thought that the State has no right to dictate to religion under the First Amendment protection.
In the UK?
But let's say it happened in the US. This would actually be an example of the State staying out of it. By requiring businesses to let people have Sunday off they are advocating for a particular religious point of view.
Don't want to work on Sunday? Find an employer that will let you have that day off. That's the free market, right?
Wrong state; that’s the UK
This is not the state dictating to religion. This is the state not dictating to employers on behalf if emoloyees’ religion. To my mind they have no business doing so, no how. You are not guaranteed the right to the free exercise of religion against private organizations or individuals with whom you contract. You carry that power yourself.