An Oregon appeals court has said that the $135,000 fine against Christian bakers who refused to make a same-sex wedding cake should be reassessed.

Aaron and Melissa Klein, co-owners of Sweet Cakes by Melissa, refused to bake the cake for lesbian couple, Rachel and Laurel Bowman-Cryer, in 2013.

After the Bowman-Cryers filed complaints with the state, the Oregon Bureau of Labor and Industries (BOLI) decided that they had been illegally discriminated against and awarded them $135,000 in damages. 

The Kleins closed down Sweet Cakes three years later. They paid the fine but the money is being held by the government until completion of the appeals process.

This week, the Oregon Court of Appeals upheld the original ruling that the Kleins had illegally discriminated against the Bowman-Cryers by refusing to sell them a cake for their same-sex wedding. 

But the court took issue with the $135,000 fine and said that the BOLI had broken First Amendment requirements around "strict neutrality toward religion" in its determination of the amount the Kleins should pay.

The court has ordered the civil rights division to reassess the penalty.

"BOLI's handling of the damages portion of the case does not reflect the neutrality toward religion required by the Free Exercise Clause," said Circuit Judge Erin Lagesen.

First Liberty Institute's Stephanie Taub, legal counsel for the Kleins, said in a statement that "Oregon is trying to have its cake and eat it, too".

"The court admits the state agency that acted as both prosecutor and judge in this case was biased against the Kleins' faith," she said.

"Yet, despite this anti-Christian bias that infected the whole case, the court is sending the case back to the very same agency for a do-over.

"Today's opinion should have been the end of this ten year long saga. It's time for the state of Oregon's hostility toward Aaron and Melissa to end."