A church in Minnesota employed a woman as its business administrator for two years. The church's employment handbook indicated that the church paid unemployment taxes and implied that its employees would receive unemployment benefits if they lost their jobs. The administrator's employment ended through no fault of her own and she applied for unemployment benefits and attempted to establish a benefit account, but was notified by the state Department of Employment and Economic Development (the "Department") that employment with a church could not be used to establish a benefit account. She appealed to the civil courts.

Under state law, the Department pays unemployment benefits to an applicant who meets certain requirements. First, the applicant must file an application for unemployment benefits and establish a benefit account. After the application is filed the Department calculates the applicant's unemployment benefit, if any, based on "all the covered employment in the base period." To establish a benefit account, however, the applicant must have earned a certain minimum dollar amount of "wage credits." Wage credits are defined as "the amount of wages paid within an applicant's base period for covered employment." Employment with a church that is operated primarily for religious purposes is "noncovered employment."