Oregon state law prohibits the knowing or intentional possession of a controlled substance unless that substance has been medicinally prescribed. Alfred Smith and Galen Black (plaintiffs) were fired from their jobs after they ingested peyote for sacramental purposes at a Native American Church service. When they applied for unemployment benefits with the Employment Division, Department of Human Resources of Oregon (EDDHR) (defendant), they were determined to be ineligible for benefits because they had been discharged for work-related misconduct. Smith and Black unsuccessfully challenged the denial in state court. However, on remand, the Oregon Supreme Court vacated its previous judgment and held that the denial of benefits violated the Free Exercise Clause of the First Amendment. The United States Supreme Court granted certiorari.