How do I handle an employee who retaliated for a change in pay practice?
It appears that HR and your director are aware of the realities of the situation. Let them know (ONLY ONCE) that you are unhappy about the personal vendetta this employee has and you would like to find solutions that work for him and for you. Then let it go.
You can quietly and privately document events. However, do not discuss it further. When you discuss it with other employees you are giving this man power over you and your conversations. If asked, simply say, "Poor fellow, I would like to find a solution that works for him and for me."
Others in the workplace may try to stir the pot and instigate bickering. Do not fall victim to the drama.