It's after the Vocal Adrenaline performance in which Unique performs as a woman contrary to Jesse St. James's directions/wishes. Kurt and Mercedes watched the performance and met with Unique afterwards, and then they ended up in the parking lot. Jesse, furious, starts yelling at Unique, using male pronouns and calling her Wade. Kurt tells them to get in the car and then faces off with Jesse, expecting the confrontation to become violent because a bunch of the VA guys had followed Jesse out to the parking lot.
The story is told from Jesse's point of view, I believe, and he hadn't realized the message he was sending to Kurt, Mercedes, and Unique.
FOUND! Thank you to hsmichael, who found Man Up by accio-remus.