That's not really the issue. I've been just as annoyed by Michael Moore at times when he's made films I regarded as vapid and dishonest (e.g., Bowling for Columbine). O'Keefe is, at his core, dishonest, and as a huge documentary film buff I think that's about as damning a criticism as one can level at a documentarian.
I am an attorney who represents major public-sector clients in disputes with unions CONSTANTLY. I don't find it believable that a union could impose a unilateral change to an existing contract, then enforce it, even if a member of the union believed that had happened. I also have a hard time getting upset that the members of a union that the governor has vowed to crush are, well, upset with the governor.
The comment made implied the language in the contract document was changed after final reviews were made. The counterparties signed without further review and without realizing that the actual documents being signed no longer reflected the final agreed to working document.
I don't know how the speaker would be aware of something like that unless involved in the negotiation and/or responsible for publishing the contract docs. I would expect these would be produced and controlled by counsel, but who knows? Maybe the union's legal counsel pulled a fast one. Maybe it is just some of the hot air that gets wafted around at these conventions.
My point is that if a statement like that is being made it bears investigation and, at the least, the contracting officers need to review the executed copies with the last agreed to working draft on file to see if they match up.
To your first point, O'Keefe is an agitator with pretensions to being a humorist. By no stretch of the imagination is he a professional reporter, nor is he a documentarian.
His work is slipshod and random, he relies on being there with a hidden camera right at the time someone is going to say something damning. He asks questions that are going to reveal "true" character and/or opinion. His targets are chosen just because they are most likely to make such statements.
Comments that the recordings are out of context or fabricated are just sour grapes. He does pull out the quotes he believes are going to be most damaging or most humorous, but his selected moments run for much longer than most any "mainstream" news piece sound bites and, for better or worse, they do reflect the immediate opinions of the unguarded speakers he records.
His means of capturing the comments may or may not be legal, that depends on the jurisdiction. Who actually wants to be recorded by a hidden camera? But that does not detract from the authenticity of the captured statements. Having said that, recording union members getting wasted at a convention is worthless other than for confirming what we already know.
I wish he would polish up his act but the charm of what he does put out is in the content not in the presentation. And there is little content that requires reviewing in this particular piece.